Today’s Necessity for Trade Credit Insurance from a Unique Perspective
Written by Robina Peanh
I started my career at Meridian Finance Group, a trade credit and political risk insurance brokerage helping companies mitigate nonpayment risks and arranging cross-border financing for manufacturers and their customers in emerging foreign markets. At Meridian, I developed an in-depth knowledge of credit insurance to help protect the policyholder when a customer defaults on a trade debt. During my tenure at Meridian, my biggest takeaway was how credit insurance can be used as a tool to help companies mitigate risks, expand their business internationally, and enhance their borrowing capacity with their lender.
Working on the brokerage side provided me with a deeper understanding of the credit insurance market which allowed me to better advise our clients about the commercial and political risks associated with doing business both domestically and abroad. As a result, credit insurance can positively impact companies in their periods of growth and provide protection in times of uncertainty. This foundation prepared for my transition to FGI where I could help deliver financing and working capital solutions to middle market companies globally.
Prior to joining FGI, I had built an extensive network comprised of commercial banks, private lenders, private equity firms, trade associations, and government agencies, all of which assisted me in developing a better understanding of the intricate financing needs that arise when companies are trading across borders. In my current role as a Business Development Director at FGI, I utilize a consultative approach in providing financing alternatives for our clients, who have complex requirements for their trading needs. My experience in both insurance and cross-border lending has reaffirmed my belief that credit insurance is a necessary security to ensure organizations are protected in times of uncertainty, as evidenced in today’s market. With the ongoing pandemic and global political tensions, credit insurance allows companies to protect themselves while they continue to operate, regardless of client defaults, without inhibiting their ability to access working capital.
Currently, we are witnessing a slew of challenges resulting from the pandemic and the geopolitical turmoil facing Eastern Europe. The Russian invasion of Ukraine, and the subsequent sanctions imposed in response by the U.S. and western allies, have impacted the economy and global supply chain. With surging costs, prolonged deliveries, and other financial challenges companies are facing, trade credit insurance is becoming more relevant given the intense strains on supply chains. For example, if an organization owes a vendor money but is experiencing financial constraints due to setbacks in the supply chain, it interrupts the entire sales process, further postponing fulfillment. With credit insurance, however, vendors can recover up to 90% of the invoice value, which gives them the flexibility to manage their operations efficiently and pursue new growth opportunities. This is a perfect example of how uncertainty surrounding a business can leave the company unprepared and vulnerable to negative effects, all of which can be mitigated with trade credit insurance.